Neos Russell 2000 High Income ETF (IWMI)
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Navigate Small-Cap Challenges With This ETF
Small-cap stocks are poised for a decent 2025. Helped by 3% over the past month, one aided by the Federal Reserve lowering interest rates in September, the Russell 2000 Index is higher by 12.67% YTD.
IWMI: Investing In Small-Cap Options
NEOS Russell 2000 High Income ETF offers a 14.4% yield by writing covered calls on small-cap equities, targeting monthly income. IWMI's actively managed options strategy distinguishes it from passive index funds, aiming to optimize income opportunities from the volatile Russell 2000. While IWMI's total returns lag the index and SPYI, it provides higher yield and defensive qualities during market downturns, suiting income-focused investors.
IWMI: Balanced Approach - Writing Options, Preserving Capital
IWMI offers small-cap exposure with high income via call writing, balancing yield and drawdown management, but expect long-term underperformance versus the index. IWMI's tax efficiency using Section 1256 contracts and ROC distributions makes it preferable for taxable accounts over RYLD, despite similar strategy outcomes. Yield management is key: IWMI targets stable payouts, but NAV erosion is a risk in adverse markets due to capped upside and maintained distributions.
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Neos Russell 2000 High Income ETF Profile
| BATS Exchange | US Country |
Overview
The fund described is an actively-managed Exchange-Traded Fund (ETF) with a primary goal of achieving its investment objectives through a two-fold strategy. Initially, the fund focuses on investments in one or more ETFs that aim to mirror the performance of the Russell 2000® Index, a renowned small-cap stock index representing approximately the smallest 2000 stocks in the Russell 3000 Index. It encompasses a comprehensive portfolio of stocks that are part of the Russell 2000® Index or a combination that aligns with it. Furthermore, this fund employs a call options strategy, focusing on generating high monthly income. This is primarily achieved by writing (or selling) call options on the Russell 2000®, thereby leveraging the underlying securities' volatility and market movements to provide returns to the investors. This innovative approach combines direct index investment with an options strategy, aiming to offer investors both growth through index tracking and income through options premiums.
Products and Services
The fund focuses on the following primary products and services:
- Investment in ETFs Tracking the Russell 2000® Index: The fund invests in one or more ETFs that are designed to follow the performance of the Russell 2000® Index, which is comprised of small-cap companies. This allows investors to diversify their portfolios and participate in the potential growth of these companies.
- Direct Investment in Russell 2000® Index Stocks: Besides ETFs, the fund may also directly invest in the portfolio of stocks making up the Russell 2000® Index. This direct investment approach aims to closely mimic the index's performance, offering an opportunity for the fund to benefit directly from the performance of the stocks within the Russell 2000®.
- Call Options Strategy for High Monthly Income: A significant portion of the fund's strategy involves writing (selling) call options on the Russell 2000® Index. This approach is designed to generate high monthly income for the fund. By selling call options, the fund collects premium payments from buyers of these options, which can provide a steady income stream regardless of the market conditions. This strategy leverages the volatility and price movements of the small-cap market to produce income, adding an income-generating layer to the fund's portfolio in addition to potential capital gains from index tracking.
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